Edited version of private advice

Authorisation Number: 1052148555413

Date of advice: 2 August 2023

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2022

Year ended 30 June 2023

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

General

You were born in country X.

You migrated to Australia and became an Australian citizen in 19XX.

You lived in country X with your spouse and child until you came back to Australia permanently in August 20XX for your child to continue schooling in Australia.

You purchased a home in Australia using loan funds in 20XX.

Your spouse obtained permanent residency in 20XX.

Your relative became ill in 20XX and required special and continuing care.

After discussions with doctors and the rest of the family, it was determined that your spouse would care for your only child in Australia while you went back to country X to care for the relative.

You came back to Australia from time to time.

You travelled by yourself most of the time, your spouse accompanied you sometimes.

You stayed in country X during the 20XX income year looking after your relative, who was passed away in 20XX.

You came back to Australia in January 20XX.

You departed for country X with your spouse to manage the deceased estate of your relative in February 20XX.

You came back to Australia in June 20XX.

You departed for country X again in July 20XX with your spouse with the intention to complete the settlement of the deceased estate.

You spent less than 180 days in Australia during the 20XX income year.

You enter country X on a temporary visa.

The visa allows you to stay in country X for 1 year, but you have a permit issued by the local foreign government to stay for x years due to family reasons.

Accommodation and assets

Your spouse and child lived in your house until it was sold in 20XX.

You signed the sale contract electronically while you were overseas.

You bought another family home in Australia.

You did not financially support your family as you and your spouse live on pension and savings.

You live in your home while in country X. The property is owned by your husband in his personal name.

You own a commercial office in country X.

You have personal savings accounts with a country X bank.

You have savings accounts and a credit card in Australia.

All household effects were kept in your family house in Australia prior to departure.

All your personal effects were kept in your family house in Australia prior to departure.

You have a drivers' license in Australia and in country X.

Employment

You are employed in country X.

The employment is ongoing, and you can work remotely.

You are on unpaid leave and your employment will be terminated if you do not return to work before the end of August 20XX.

You became a resident of country X for taxation purposes because you were in that country for more than 180 days.

You lodged your Australian income tax returns as a non-resident except for the 20XX financial year where you lodged as a resident.

Social connections

You have not maintained any professional, social, or sporting connections in country X.

You have not maintained any professional, social, or sporting connections in Australia.

You informed the Australian Electoral Commission upon each election event when you were overseas.

You did not inform Medicare that you were departing Australia.

You did not notify your private health insurance provider of your departure or cancel your cover.

You did not advice Australian bank that you are a foreign resident.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Overview of the law

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are:

•         the resides test (also referred to as the ordinary concepts test)

•         the domicile test

•         the 183-day test, and

•         the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains "home": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the ordinary concepts test is whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

Application to your situation

We have taken the following into consideration when determining whether you meet the resides test:

•         You stayed in country X during the 20XX income year looking after your relative.

•         You spent less than 180 days in Australia during the 20XX income year.

•         You stayed in your family apartment in country X.

•         You have held employment in Country X since January 20XX.

•         You became a resident for taxation purposes of country X.

•         You lodged your Australian income tax returns as a non-resident.

You are not a resident of Australia under the resides test for the relevant income years.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Domicile

Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

Application to your situation

In your case, you were born in country X and your domicile of origin is country X. You immigrated to Australia in and became an Australian citizen.

It is considered that you abandoned your domicile of origin in country X and acquired a domicile of choice in Australia. You were not entitled to reside in country X indefinitely and while living in that country, you held a temporary visa and a special permit which was issued by foreign government to stay for x years due to family reasons.

Therefore, your domicile is Australia.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are:

•         whether the taxpayer has definitely abandoned, in a permanent way, living in Australia

•         whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

a)    the intended and actual length of the taxpayer's stay in the overseas country;

b)    whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

c)    whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

d)    whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

e)    the duration and continuity of the taxpayer's presence in the overseas country; and

f)     the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

Application to your situation

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•         You spent majority of time in country X to look after your relative during relevant income years.

•         You lived in your family apartment in country X.

•         Your spouse lived in Australia to look after your only child, they lived in your family home.

•         You did not financially support your family because you and your spouse live on pension and savings.

•         You have held employment in Country X since January 20XX.

•         You have a country X driver's licence.

•         You own a commercial office in country X.

•         You have personal savings accounts in country X.

The Commissioner is satisfied that your permanent place of abode is outside Australia.

Therefore, you are not a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•         the person's usual place of abode is outside Australia, and

•         the person does not intend to take up residence in Australia.

Application to your situation

You have not been present in Australia for 183 days or more during relevant income years. Therefore you are not a resident under this test.

Superannuation test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

Application to your situation

You are not a member on behalf of whom contributions are being made to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident under this test.

Conclusion

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the relevant income years.